Hainan tropical island hub for global investment

For Michael Heilig, who is from Germany's federal association for small and medium-sized enterprises, his trip to Hainan province last week felt almost destined.

His Chinese name, "Hai Li Ge", carries a special meaning. "Hai" means sea, "Li" means reason and trust, while "Ge" means character and taste. "I believe these qualities — facing the sea, rationality, character — can be transported to Hainan and reflected in our cooperation," Heilig said.

Heilig was one of more than 100 executives from 19 countries and regions who landed in Hainan on May 25-26 for the International Life and Health Enterprises Hainan Visit event, co-hosted by CITIC Group and the Hainan provincial government. Among them were 80 foreign life-health companies and 105 senior executives from global giants such as Siemens, Pfizer and Novo Nordisk, as well as a host of German "hidden champions".

What brought them here, in the heat of late May, was not the island's famous beaches, though those were a welcome bonus, but the accelerating dividends of the island-wide special customs operations, which kicked off in Hainan Free Trade Port on Dec 18.

For Heilig, the most eye-catching policy is the 30-percent value-added processing rule. "German SMEs are often called 'hidden champions'. The policy we learned about today — 30 percent value-added processing in Hainan allowing tariff-free access to China's mainland — is particularly innovative and appealing," he said.

"Given Hainan's strategic location, it can connect to the huge Chinese mainland market as well as the broader Asia-Pacific and Southeast Asia. This will be very important for German SMEs as they restructure their supply chains under the current economic situation," Heilig added.

More than 20 European companies accompanied Heilig on the trip. "The feedback has been very positive. They are very interested in Hainan, find the policies attractive and are considering the possibility of establishing a presence here — finding their own place in Hainan," he said.

Peter Burnett, chief executive of the China-Britain Business Council, who has visited Hainan several times, put it more bluntly. "Hainan is not just a free trade zone — it's a free trade port, the only one in China. That means the whole island is included, with very low tax rates and low tariffs," Burnett said."Once you're in Hainan, you're free to operate and you have the ability to access the mainland — it's a launch pad."

Burnett, who led a delegation of British companies, said the 30-percent value-added policy is "of great interest". "Some companies have already set up in Hainan. Success will breed success. I expect more companies to realize the potential."

"For the United Kingdom, 80 percent of our economic output is in services. Many companies in our delegation to Hainan this time are in services — not just financial services, but also engineering, publications, media and creative industries," Burnett added.

The event was not merely a gathering of foreign firms, it was also a demonstration of how Chinese enterprises are facilitating global cooperation. Xi Guohua, chairman of CITIC Group, called Hainan Free Trade Port the highest-level form of China's opening-up.

"The full implementation of Hainan's policies presents historic opportunities for the bio-health industry to integrate into global industrial chains," Xi said. He added that CITIC will leverage its strengths as a multinational conglomerate to serve as a bridge between China and the world, deepening cooperation with Hainan in biomedicine, high-end medical care and wellness services.

To put words into action, CITIC has provided a financing support package exceeding 39 billion yuan ($5.76 billion) to facilitate win-win cooperation during this trip, Xi disclosed.

The success of this event, Xi said, confirms that China is a grand stage and a vast market for investment, Hainan is a new highland and a new gateway for open cooperation, and CITIC is a reliable guide and bridge for global partners.

Xi made three proposals: first, to build an open and win-win island by establishing multi-level cooperation mechanisms; second, to create an innovative and dynamic island by integrating financial resources and strengthening the Hainan-Hong Kong dual-hub linkage; and third, to foster a culturally charming island through publishing, think tanks and media to enhance international cultural exchanges.

While policies attract, execution matters. Li Tao, vice-president of Siemens Healthineers Greater China, said what made this trip different from many others he had attended was the sequencing: site visits first, then discussions.

"In many other events, it is usually meetings first and then site visits. Today, during the discussions, we were able to have very good conversations because we had visited three areas — Haikou, Boao and Sanya — which made the process much more efficient: see first, then discuss," Li said. He summed up Hainan's approach in three words: pragmatic, effective and professional — with an emphasis on efficiency.

On Dec 18, Siemens Energy became the first foreign-invested enterprise to complete registration after receiving its business license at the Yangpu administrative service center in Danzhou, Hainan. The company simultaneously broke ground on a new gas turbine assembly base and service center, a project it described as its first project of its kind in China.

The move marked a milestone manufacturing project demonstrating investor confidence, and came as Hainan launched island-wide special customs operations on the same day.

Joern Schmuecker, senior vice-president, Gas Services Central of Siemens Energy, said: "Establishing a gas turbine assembly base and service center in Hainan aligns perfectly with the free trade port's vision of becoming a new high ground for openness and international cooperation. Together with our partners, we will drive collaborative innovation across the industry value chain, continuously enhance equipment delivery and service capabilities, and build an industrial ecosystem that contributes to energy resilience in China and across the world."

Meanwhile, French pharmaceutical company Mayoly has also established a presence on the island, while Singapore-based Fullerton Health Group opened Hainan's first wholly foreign-owned hospital.

Companies' enthusiasm is backed by hard data. Since the special customs operations started on Dec 18, Hainan had added 1,004 new foreign firms up to April 29, up 35.86 percent year-on-year.

As of the end of April, Hainan had 12,300 foreign-invested enterprises, with investment sources covering 180 countries and regions.

Feng Fei, Party secretary of Hainan, told a conference last week that the life and health industry is a key pillar of the Hainan Free Trade Port, and the province's excellent ecology, open industrial policies and vast market potential make it uniquely positioned.

"The island province is becoming a new frontier of China's opening-up, a hotbed for mutually beneficial cooperation and a new engine for economic globalization," Feng said. "Choosing Hainan means choosing opportunities. Investing in Hainan means investing in the future."

He emphasized the importance of developing "two bases" — one for Chinese enterprises expanding globally and another for foreign companies seeking access to the Chinese market.

Hainan's negative list for foreign investment is the shortest in the country, Feng said, extending a warm welcome to international investors.

Sean Stein, president of the US-China Business Council, offered a concrete example of how Hainan's new policies are changing investment decisions. "Previously, a major US company that refurbishes used products from Southeast Asia and Japan could not do so in China due to regulations. Now, after the kickoff of island-wide special customs operations, the company is setting up a base in Hainan to renovate and re-export the products globally," Stein said. "That's a big, encouraging change."

Tesla has also seen a surge in activity across its Hainan outlets. A Tesla spokesperson told China Daily that Hainan's ecological advantages and open policy environment make it "an ideal base for promoting green mobility worldwide". Due to the new customs policies and local government subsidies, foot traffic at Tesla's stores in Haikou has risen 20 percent month-on-month.

The influx of foreign businesses is not accidental. Hainan has been systematically improving its business environment. Chen Shuying, an official of the Hainan provincial market supervision administration, said that a series of reform measures have shortened the preparation time for foreign-funded enterprises to invest in Hainan.

The process for foreign enterprises has been changed from "separate handling by different departments" to "integrated processing", compressing the number of procedures from five to one and reducing paperwork by more than 77 percent, Chen said.

In late April, Hainan issued a three-year action plan to improve foreign-related services and the international business environment, introducing 30 specific measures in seven areas. These include extending Hainan's enterprise registration window to Hong Kong and offering customized "one enterprise, one policy" services for key industries.

He Jifeng, deputy director of the Hainan Provincial Department of Business Environment Development, said the action plan aims to create a precise foreign investment service system covering the entire lifecycle of enterprises.

"We will refine annual plans, clarify timelines, strengthen coordinated implementation and put every reform measure and every service scenario into practice — so that more foreign enterprises can invest with confidence, operate with ease and develop with focus in Hainan," said He.

For Heilig, Hainan's progress is still in the early stages, but he is optimistic. "We are watching closely. For German companies, our needs include not only open policies, but also important international infrastructure — education, medical resources and most importantly talent to support business development," he said. "Much work is being done. We believe Hainan will develop well."

When asked whether Hainan could become a new center or model for China-Germany cooperation, Heilig did not hesitate. "I hold a very positive attitude. I believe it will certainly become a new model or benchmark."

That confidence is shared by many. Burnett from the China-Britain Business Council, after a beach walk at sunset, put it simply: "You sometimes forget that you're in an industrial zone. So you can come to work, invest in Hainan and feel like you're on holiday."

Behind that pleasant feeling lies a serious business case. With its unique policies, improving infrastructure, coordinated governance and growing openness, Hainan is steadily transforming from a tropical resort into a genuine hub for global investment, experts said.